CONDENSED CONSOLIDATED INTERIM FINANCIAL …€¦ · authorized for issue by the board of directors of the Company on May 26, 2016. These condensed consolidated interim financial

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AND NOTES

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(UNAUDITED)

2

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORTING

The accompanying condensed consolidated interim financial statements of Goldsource Mines Inc. (“the Company”) have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”). Management acknowledges responsibility for the preparation and presentation of the condensed consolidated interim financial statements, including responsibility for significant accounting estimates and the choice of accounting principles and methods that are appropriate to the Company‘s circumstances.

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

The Company's independent auditor has not performed a review of these condensed consolidated interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.

3

GOLDSOURCE MINES INC. Table of Contents Page Condensed Consolidated Statements of Financial Position 4 Condensed Consolidated Interim Statements of Operations and Comprehensive Loss 5 Condensed Consolidated Interim Statements of Cash Flows 6 Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity 7 Notes to the Condensed Consolidated Interim Financial Statements 8 – 16

4

GOLDSOURCE MINES INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED – EXPRESSED IN CANADIAN DOLLARS) AS AT March 31, 2016 December 31, 2015 ASSETS Current asset

Cash and cash equivalents $ 284,095 $ 1,792,847 Amounts receivable 607 - Taxes receivable 7,417 22,560 Prepaid expenses 92,424 39,779 Held-for-trading securities (note 4) 87,000 43,875

Total current assets 471,543 1,899,061

Non-current asset

Deposit 252,705 270,294 Rent deposit 46,576 46,576 Exploration and evaluation assets (note 6) 10,525,833 9,551,925 Property, plant and equipment (note 5) 4,498,755 4,240,711

Total non-current assets 15,323,869 14,109,506

TOTAL ASSETS $ 15,795,412 $ 16,008,567

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities

Accounts payable and accrued liabilities (note 9) $ 281,965 $ 292,255 Loan payable (note 7) 1,300,806 1,388,550

Total current liabilities 1,582,771 1,680,805 Non-current liabilities

Rehabilitation provision (note 8) 228,194 203,690

Total liabilities 1,810,965 1,884,495

Shareholders’ equity

Capital stock (note 10) 44,553,034 44,531,420 Reserves (note 10) 6,049,670 5,976,447 Deficit (36,618,257) (36,383,795)

Total shareholder’s equity 13,984,447 14,124,072

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 15,795,412 $ 16,008,567

Nature and continuance of operations (note 1) Contingency (note 6) Subsequent events (note 14) Approved by the Board and authorized for issue on May 26, 2016.

“J. Scott Drever” “Graham C. Thody”

Director Director The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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GOLDSOURCE MINES INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED – EXPRESSED IN CANADIAN DOLLARS)

For the three months ended March 31, 2016 2015 Corporate and administrative expenses

Foreign exchange (gain) loss $ (5,210) $ 33,961 General exploration 2,800 1,800 Insurance 14,115 9,398 Office and miscellaneous 5,586 10,129 Professional fees (note 9) 15,645 11,707 Regulatory and transfer agent fees 5,539 5,055 Remuneration (note 9) 136,333 109,020 Rent and communications 30,377 6,849 Share-based compensation (note 9) 28,939 152,514 Shareholder and investor relations 14,373 22,907 Tradeshow and travel 24,253 9,108

Total corporate and administrative expenses 272,750 372,448

Accretion expense 5,070 - Interest income (233) (5,413) Unrealized gain on held-for-trading securities (43,125) (2,250)

Net loss and comprehensive loss for the period $ (234,462) $ (364,785)

Basic and diluted comprehensive loss per common share $ (0.00) $ (0.00)

Weighted average number of common shares outstanding 127,003,988 126,517,723

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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GOLDSOURCE MINES INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED – EXPRESSED IN CANADIAN DOLLARS)

For the three months ended March 31, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ (234,462) $ (364,785) Items not affecting cash:

Share-based compensation 28,939 152,514 Unrealized gain on held-for-trading securities (43,125) (2,250) Interest income (233) (5,413) Accretion expense 5,070 - Foreign exchange gain (71,357) -

Cash flows before changes in working capital items (315,168) (219,934) Amounts receivable (607) (3,473) Taxes receivable 15,143 4,088 Prepaid expenses (52,646) 13,344 Accounts payable and accrued liabilities (50,773) (126,684)

Net cash used in operating activities (404,050) (332,659)

CASH FLOWS FROM FINANCING ACTIVITIES Loan interest payment (39,879) - Capital stock issued 15,300 -

Net cash provided by financing activities (24,579) -

CASH FLOWS FROM INVESTING ACTIVITIES Property, plant and equipment (276,165) (888,020) Exploration and evaluation (804,191) (395,422) Interest income 233 3,486

Net cash used in investing activities (1,080,123) (1,279,956)

Change in cash and cash equivalents, during the period (1,508,752) (1,612,615) Cash and cash equivalents, beginning of the period 1,792,847 7,245,824

Cash and cash equivalents, end of the period $ 284,095 $ 5,633,209

Cash and cash equivalents is represented by:

Cash $ 142,725 $ 333,209 Cash equivalents 141,370 5,300,000

$ 284,095 $ 5,633,209

Supplemental disclosure with respect to cash flows (note 12) The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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GOLDSOURCE MINES INC. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED – EXPRESSED IN CANADIAN DOLLARS) Capital stock Reserves Deficit Total Number Amount Share-based

payments

Balance at December 31, 2014 126,517,723 $ 44,434,337 $ 5,478,278 $ (35,142,379) $ 14,770,236

Share-based compensation - - 153,864 - 153,864 Net loss and comprehensive loss for the period - - - (364,785) (364,785)

Balance at March 31, 2015 126,517,723 44,434,337 5,632,142 (35,507,164) 14,559,315

Stock options expired - - (113,772) 113,772 - Share-based compensation - - 463,001 - 463,001 Exercise of warrants 455,526 97,083 (4,924) - 92,159 Net loss and comprehensive loss for the period - - - (990,403) (990,403)

Balance at December 31, 2015 126,973,249 44,531,420 5,976,447 (36,838,795) 14,124,072

Share-based compensation (note 10) - - 79,537 - 79,537 Exercise of options (note 10) 63,250 19,114 (6,314) - 12,800 Exercise of warrants (note 10) 10,000 2,500 - - 2,500 Net loss and comprehensive loss for the period - - - (234,462) (234,462)

Balance at March 31, 2016 127,046,499 $ 44,553,034 $ 6,049,670 $ (36,618,257) $ 13,984,447

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

GOLDSOURCE MINES INC. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED – EXPRESSED IN CANADIAN DOLLARS) THREE MONTHS ENDED MARCH 31, 2016 AND 2015 TSX.V:GXS

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1. NATURE AND CONTINUANCE OF OPERATIONS Goldsource Mines Inc. (the “Company” or “Goldsource”) is a Canadian resource company engaged in exploration and development. The Company’s primary business objective is to advance its Eagle Mountain Gold Project in Guyana, South America towards initial production. Goldource is incorporated under the jurisdiction of the Province of British Columbia, Canada pursuant to the British Columbia Business Corporations Act. The head office and principal address of the Company is 570 Granville Street, Suite 501, Vancouver, BC, Canada, V6C 3P1. The address of the Company’s registered and records office is 19th Floor, 885 West Georgia Street, Vancouver, BC, Canada, V6C 3E8. The Company is listed on the TSX Venture Exchange (“TSX-V”) under the symbol GXS. The Company currently has no proven or probable reserves and on the basis of information to date, it has not yet determined whether its Eagle Mountain Gold Project contains economically recoverable ore reserves. Consequently, the Company considers itself to be an exploration stage company. The recoverability of the amount shown for exploration and evaluation assets is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of the property, if required, and upon future profitable production or proceeds from the disposition thereof. Although the Company has cash on hand of $284,095 as at March 31, 2016 and subsequently received $1.3 million on the exercise of warrants and options and received approximately $186,000 (US$144,000) for gold shipment and sale during the commissioning phase, the Company has incurred net losses of $234,462 for the three months ended March 31, 2016 (March 31, 2015 – $364,785), and has accumulated losses of $36.6 million as at March 31, 2016 (December 31, 2015 – $36.4 million). These factors represent a material uncertainty that may cast a significant doubt about the Company’s ability to continue as a going concern. These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent on the ability of the Company to raise debt or equity financings, and the attainment of profitable operations in its Eagle Mountain Gold Project. These condensed consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities, or the impact on the statement of operations that might be necessary should the Company be unable to continue as a going concern, and such adjustments could be material. 2. BASIS OF PRESENTATION

Statement of compliance These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2015, which include information necessary or useful to understanding the Company’s business and financial statement presentation. In particular, the Company’s significant accounting policies, use of judgments and estimates were presented in notes 2 and 3, respectively, of these consolidated financial statements, and have been consistently applied in the preparation of these condensed consolidated interim financial statements. Basis of preparation These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. Additionally, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting, except for cash flow information. These condensed consolidated interim financial statements were authorized for issue by the board of directors of the Company on May 26, 2016. These condensed consolidated interim financial statements include the accounts of Goldsource and its wholly-owned subsidiaries. Goldsource consolidates subsidiaries where the Company has the ability to exercise control. Control is achieved when the Company has the power to govern the financial and operating policies of the entity. Control is normally achieved through ownership, directly or indirectly, of more than 50 percent of the voting power. Control can also be achieved through power over more than half of the voting rights by virtue of an agreement with other investors or through the exercise of de facto control. All intercompany balances, transactions, income and expenses, and profits or losses have been eliminated on consolidation.


9

2. BASIS OF PRESENTATION (continued) Company Ownership Place of Incorporation Principal Activity Eagle Mountain Gold Corp. 100% Canada Holding Company Stronghold Guyana Inc. 100% Guyana Exploration and Evaluation Company Tinto Roca Exploracion S.A. de C.V. 100% Mexico Exploration and Evaluation Company

3. NEW STANDARDS NOT YET ADOPTED IFRS 9 – Financial instruments In July 2014, the IASB issued the final version of IFRS 9 replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on an entity’s business model and the contractual cash flow of the financial asset. Classification is made at the time the financial asset is initially recognized, namely when the entity becomes a party to the contractual provisions of the instrument. IFRS 9 amends some of the requirements of IFRS 7 Financial Instruments: Disclosures, including added disclosures about investments in equity instruments measured at fair value in other comprehensive income, and guidance on financial liabilities and derecognition of financial instruments. The amended standard is effective for annual periods beginning on or after January 1, 2018, with earlier adoption still permitted. IFRS 15 – Revenue from contracts with customers In May 2014, the IASB issued IFRS 15 which supersedes IAS 11 – Construction Contracts, IAS 18 – Revenue, IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRST 18 – Transfers of Assets from Customers and SIC 31, Revenue – Barter Transactions Involving Advertising Services. IFRS 15 establishes a single five step model framework for determining the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The standard is currently mandatory for annual periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 16 – Leases In January 13, 2016, the IASB issued IFRS 16 Leases, the new leases standard. The standard is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 has also been applied. The Company has not yet completed the process of assessing the impact that IFRS 9, IFRS 15 and IFRS 16 will have on its consolidated financial statements, or whether to early adopt this new requirement. 4. HELD-FOR-TRADING SECURITIES March 31, 2016 December 31, 2015 Opening balance $ 43,875 $ 28,500 Changes in marked-to-market value 43,125 15,375

Closing balance $ 87,000 $ 43,875

Under IFRS, held-for-trading securities are to be recorded at fair value at each reporting date and the resulting gains or losses are to be included in the results for the period. For the three months ended March 31, 2016, the Company’s 675,000 (December 31, 2015 – 675,000) Westcore Energy Ltd. and 300,000 (December 31, 2015 – 300,000) Para Resources Inc. common shares had an unrealized marked-to-market gain of $43,125 (March 31, 2016 – $2,250).


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5. PROPERTY, PLANT AND EQUIPMENT

Eagle Mountain Gold Project Construction in

progress(2)

Other

Equipment(3)

Corporate

Office Total

Cost As at December 31, 2014 $ - $ 70,707 $ 60,848 $ 131,555

Additions 3,089,213 988,138 - 4,077,351 Reclassification - 19,596 - 19,596 Rehabilitation provision (note 8) 203,690 - - 203,690

Balance at December, 31, 2015 3,292,903 1,078,441 60,848 4,432,192

Additions 211,324 86,156 - 297,480 Rehabilitation provision (note 8) 19,434 - - 19,434

As at March 31, 2016 $ 3,523,661 $ 1,164,597 $ 60,848 $ 4,749,106

Accumulated depreciation As at December 31, 2014 $ - $ 20,990 $ 60,848 $ 81,838

Depreciation for the year - 109,643 - 109,643

Balance at December 31, 2015 - 130,633 60,848 191,481

Depreciation for the period (1)

- 58,870 - 58,870

As at March 31, 2016 $ - $ 189,503 $ 60,848 $ 250,351

Carrying amounts As at December 31, 2015 $ 3,292,903 $ 947,808 $ - $ 4,240,711

As at March 31, 2016 $ 3,523,661 $ 975,094 $ - $ 4,498,755 (1)

During the three month period ended March 31, 2016, depreciation of $58,870 (March 31, 2015 – $5,068) was capitalized to exploration and evaluation assets (note 6).

(2) Assets under construction at Eagle Mountain Gold Project are capitalized as “Construction in Progress” and are presented as a separate

asset within property, plant and equipment. Construction in Progress includes any costs directly attributable to bringing the assets under construction into working condition for its intended use. The cost of Construction in Progress is currently not depreciated. Depreciation commences once the asset is complete and available for use.

(3) Other equipment consists of vehicles, buildings and equipment.

Capital Commitments In addition to entering into various operational commitments in the normal course of business, the Company has entered into a number of contractual commitments related to design and acquisition of plant and equipment for the Phase I Eagle Mountain Gold Project. As at March 31, 2016, these commitments totalled approximately $2,363,609 (paid) (December 31, 2015 – $2,363,609 (paid)) related to the construction of the plant at the Eagle Mountain Gold Project and totalled approximately $1,301,344 ($1,240,265 paid) (December 31, 2015 – $1,301,344 ($1,185,817 (paid)) related to other contractual agreements for the Eagle Mountain Gold Project. Subsequent to March 31, 2016, the Company entered into additional contractual commitments related to the Eagle Mountain Gold Project totaling approximately $340,980 ($51,334 paid), which cumulative amounts to $4,005,933 ($3,655,208 paid).


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6. MINERAL PROPERTIES – EXPLORATION AND EVALUATION ASSETS Eagle Mountain Gold Project, Guyana, South America

As at December 31,

2014

Additions during the

year

As at December 31,

2015

Additions during the

period

As at March 31,

2016 Acquisition costs Exploration and evaluation assets acquired $ 5,722,081 $ - $ 5,722,081 $ - $ 5,722,081 Shares issued 853,427 - 853,427 - 853,427

Subtotal, acquisition costs 6,575,508 - 6,575,508 - 6,575,508

Exploration and evaluation expenditures: - - Assays 107,171 32,487 139,658 4,080 143,738

Borrowing costs (note 7) - 24,210 24,210 41,081 65,291 Camp costs 35,372 424,057 459,429 369,757 829,186 Depreciation (note 5) 20,991 109,643 130,634 58,870 189,504 Drilling - 2,230 2,230 6,333 8,563 Drilling (reclassified) 19,596 (19,596) - - - Operations and general 107,868 463,293 571,161 78,626 649,787 Road maintenance - 594,788 594,788 31,018 625,806 Salaries (note 9) 260,748 541,617 802,365 284,196 1,086,561 Share-based compensation (notes 9, 10) 10,544 13,048 23,592 50,598 74,190 Tailings - 14,473 14,473 1,843 16,316 Technical services and consulting 179,140 34,737 213,877 47,506 261,383

Subtotal, exploration and evaluation assets 741,430 2,234,987 2,976,417 973,908 3,950,325

Total, exploration and evaluation assets $ 7,316,938 $ 2,234,987 $ 9,551,925 $ 973,908 $ 10,525,833

In connection with the acquisition of Eagle Mountain, the Company acquired a 100% interest in the Eagle Mountain Gold Project located in Guyana. On March 6, 2014, the Company executed an Amendment Agreement with Omai Gold Mines Ltd. (“OGML”), a subsidiary of IAMGOLD Corporation with respect to the Eagle Mountain Gold Project in Guyana. The summary of amending terms includes:

I. Goldsource will issue to OGML 3,389,279 common shares (issued);

II. Goldsource shall pay OGML, US$3,025,501 (“Initial Payment”) in cash or, at Goldsource’s option, in common shares of Goldsource, at a price per share equal to a five percent (5%) discount to the Volume Weighted Average Price (“VWAP”) of Goldsource’s common shares for the twenty trading days prior to issuance, upon the earlier of:

a. If average market price of gold is US$1,400/oz. or higher upon achieving total production of 40,000 ounces of gold, then the

Initial Payment is due 90 days after 40,000 ounces have been produced, otherwise payment to be made 90 days after 50,000 ounces produced from the Project, or

b. Ninety days after having completed one year of gold production under a large scale Mining License issued by the Guyana Geology and Mines Commission(“GGMC”), or

c. Five days after the date on which the 20-day VWAP of Goldsource exceeds $0.75 per share, provided such date is not earlier than March 1, 2015.

III. Goldsource shall pay OGML, an additional US$5,000,000 (“Final Payment”) in cash or at Goldsource’s option, US$2,500,000 cash and

US$2,500,000 in common shares of Goldsource, at a price per share equal to a five percent (5%) discount to the 20-day VWAP of Goldsource’s common shares. The Final Payment shall be made one year after the earlier of:

a. The payment set out in, (“II a.”) above has been made, or

b. After having completed one year of gold production under a large scale Mining License issued by the GGMC.


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6. MINERAL PROPERTIES – EXPLORATION AND EVALUATION ASSETS (continued) The Company pledged a $252,705 (US$194,540) (December 31, 2015 – $270,294 (US$194,540)) reclamation site bond, in the form of a non-interest bearing bank guaranteed deposit, to the Guyana Geology and Mines Commission for exploration permits on the Eagle Mountain Gold Project. Goldsource’s subsidiary Stronghold Guyana Inc. (“Stronghold”) holds a prospecting license on the Eagle Mountain Gold Project. In August 2014, the Guyana Geology and Mines Commission granted a Medium Scale Mining Permit (the “Permit”) to Kilroy Mining Inc. (“Kilroy”) to mine gold, diamonds, precious metals and minerals on a portion within Eagle Mountain Gold Project. As the Permit is required under Guyana law to be held by a Guyanese national, Stronghold has entered into agreements with Kilroy, a private arm’s length Guyanese company pursuant to which Stronghold and Kilroy will jointly operate the Eagle Mountain Gold Project. Kilroy has granted Stronghold the exclusive right to conduct mining operations on the Eagle Mountain Gold Project including any additional areas acquired by Kilroy. Stronghold will fund all expenditures on the Eagle Mountain Gold Project and receive 100% of all revenues, subject to applicable government royalties and a 2% net smelter return royalty to Kilroy as compensation for its participation. As part of the agreements, Goldsource issued Kilroy 250,000 common shares of the Company. 7. LOAN PAYABLE

On December 21, 2015, the Company obtained a loan of US$1.0 million (the “Loan”) with Mitan Holdings Ltd. (“Mitan Holdings”), a company controlled and directed by a director of the Company. The purpose of the Loan is to provide the Company with additional funds, which may be necessary for capital requirements towards the Eagle Mountain Gold Project. The Loan is repayable in full, twelve months after the draw-down and bears interest at a rate of 12% per annum, payable quarterly. Goldsource has pledged the shares of its wholly-owned subsidiary, Eagle Mountain Gold Corp., to Mitan Holdings as security for the Loan and has paid a commitment fee of $19,660 (US$15,000) upon execution of the Loan, of which was capitalized to the cost of the Eagle Mountain Gold Project under exploration and evaluation assets. Management determined that the allocation and subsequent accretion of the commitment cost over the life of the Loan to have an immaterial impact on the statement of financial position. During the three months ended March 31, 2016, the Company paid interest of $39,879 (US$30,000) (December 31, 2015 – $nil) of interest and incurred interest of $41,081 (US$29,918) (December 31, 2015 – $4,550 (US$3,288)), which has been capitalized to the cost of the Eagle Mountain Gold Project under exploration and evaluation assets. 8. REHABILITATION PROVISION

The rehabilitation provision relates to the construction of the Eagle Mountain Gold Project. Significant reclamation and closure activities include land rehabilitation, removal of buildings and plant under construction, and other costs.

March 31, 2016 December 31, 2015 Balance, beginning of period $ 203,690 $ -

Changes in obligation Accretion expense 5,070 - Changes in estimates 19,434 203,690

Balance, end of period $ 228,194 $ 203,690

The present value of rehabilitation provision, using an effective discount rate of 5% (December 31, 2015 – 5%), is currently estimated at $228,194 (US$166,074) (December 31, 2015 – $203,690 (US$147,175)), reflecting anticipated cash flows to be incurred over approximately the next 7 years. The undiscounted value of these obligations is $289,801 (US$223,500) (December 31, 2015 – $283,028 (US$204,500)), calculated using a long-term inflation rate assumption of 1% (December 31, 2015 – 0.2%). In view of uncertainties concerning asset retirement obligations, the ultimate costs could be materially different from the amounts estimated. The estimate of future asset retirement obligations is subject to change based on amendments to applicable laws and legislation. Future changes in asset retirement obligations, if any, could have a significant impact.


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9. RELATED PARTY TRANSACTIONS During the three months ended March 31, 2016, the Company entered into the following transactions with related parties: Legal fees Legal fees of $3,712 (March 31, 2015 – $5,210), which were included in professional fees were paid or accrued to Koffman Kalef LLP, a law firm of which an officer of the Company is a partner, of which $1,040 (December 31, 2015 – $4,583) was payable at March 31, 2016. The Company recognized $210 (March 31, 2015 – $380) in share-based payments to this officer. Key management compensation

March 31, 2016 March 31, 2015 Key management short-term benefits

(1) $ 95,000 $ 78,750

Share-based payments (2)

15,872 116,604

$ 110,872 $ 195,354 (1)

Goldsource’s key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company. Total key management remuneration was recorded in the statements of operations and comprehensive loss and paid to the President, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer of Goldsource.

(2) Share-based payments recorded for all directors and officers the Company and recognized in the statement of operations and

comprehensive loss.

Other Transactions Paid in remuneration $14,671 (March 31, 2015 – $nil) for technical services and recognized $4,087 (March 31, 2015 – $nil) in share-based payments an employee who is an immediate family member of the Chief Operating Officer of the Company. Remuneration and share-based payments to this employee have been capitalized to the costs of the Eagle Mountain Gold Project, under exploration and evaluation assets. The Company shared rent, salaries, administrative services and other reimbursable expenses with SilverCrest Mines Inc. (“SilverCrest Mines”), a company related by common directors and officers until September 30, 2015. During the three months period ended March 31, 2015, the Company incurred $44,480 for its share of these expenses, of which $16,790 was payable to SilverCrest Mines at March 31, 2015. Effective October 1, 2015, the Company and SilverCrest Mines terminated their agreement dated January 1, 2011 and concurrently, the Company and SilverCrest Metals Inc. (“SilverCrest Metals”), a newly incorporated company, entered into an allocation of costs agreement to share salaries, administrative services and other reimbursable expenses. During the three months ended March 31, 2016, the Company incurred $46,332 for its share of these expenses, of which $18,544 (December 31, 2015 - $78,565) was payable to SilverCrest Metals at March 31, 2016. 10. CAPITAL STOCK AND RESERVES Authorized shares The Company’s authorized capital stock consists of an unlimited number of common shares and an unlimited number of preferred shares without nominal or par value. At March 31, 2016, the Company had 127,046,499 common shares outstanding and no preferred shares outstanding.

Stock options The Company has a rolling stock option plan under which it is authorized to grant stock options to executive officers and directors, employees and consultants, enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. The exercise price of each option equals the market price of the Company's stock as calculated on the date of the grant. The options can be granted for a maximum term of 10 years, and certain options to employees and consultants vest over periods of time, determined by the board of directors. Options granted to investor relations consultants shall vest over a period of at least 1 year. The Company has not granted options for periods exceeding 5 years. In February 2016, the Company granted stock options to employees and consultants to purchase an aggregate of 385,000 common shares of the Company at an exercise price of $0.28 per share for a five year term expiring February 1, 2021. Of the stock options granted, 25,000 will be subject to a 12-month vesting schedule pursuant to which 25% vested on May 1, 2016 and a further 25% shall vest every 3 months thereafter until fully vested.


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10. CAPITAL STOCK AND RESERVES (continued) Stock option transactions and the number of stock options outstanding and exercisable are summarized as follows: Number of Weighted Average Options Exercise Price As at December 31, 2014 4,041,945 $ 0.28

Issued 5,315,000 $ 0.20 Expired (167,210) $ 1.57 Forfeited (25,000) $ 0.24

As at December 31, 2015 9,164,735 $ 0.28

Issued 385,000 $ 0.28

Exercised (63,250) $ 0.20

As at March 31, 2016 9,486,485 $ 0.22

Options Outstanding Options Exercisable

Exercise Price Expiry Date Number of Shares Issuable

on Exercise

Weighted Average

Remaining Life (Years)

Weighted Average

Exercise Price

Number of Shares Issuable on

Exercise

Weighted Average

Exercise Price

$ 0.19 February 18, 2017 395,723 0.89 $ 0.19 395,723 $ 0.19 $ 0.47 September 20, 2017 158,289 1.47 $ 0.47 158,289 $ 0.47 $ 0.16 May 14, 2018 50,000 2.12 $ 0.16 50,000 $ 0.16 $ 0.16 June 25, 2018 825,000 2.24 $ 0.16 825,000 $ 0.16 $ 0.23 February 18, 2019 395,723 2.89 $ 0.23 395,723 $ 0.23 $ 0.24 April 10, 2019 2,025,000 3.03 $ 0.24 2,025,000 $ 0.24 $ 0.20 February 16, 2020 3,091,750 3.88 $ 0.20 2,318,813 $ 0.20 $ 0.16 October 1, 2020 35,000 4.51 $ 0.16 8,750 $ 0.16 $ 0.21 December 16, 2020 2,125,000 4.72 $ 0.21 2,075,000 $ 0.21 $ 0.28 February 1, 2021 385,000 4.84 $ 0.28 360,000 $ 0.28

9,486,485 3.57 $ 0.22 8,612,298 $ 0.22

Share-based compensation During the three months ended March 31, 2016, the Company granted 385,000 (March 31, 2015 – 3,140,000) incentive stock options with a weighted average fair value per option granted of $0.14 (March 31, 2015 – $0.11) for a total value of $53,453 (2015 – $343,534). Total share-based compensation recognized during the three month period ended March 31, 2016 under the fair value method was $79,537 (March 31, 2015 – $153,864). The Company expensed $28,939 (March 31, 2015 – $152,514) and capitalized $50,598 (2015 – $1,350) as exploration and evaluation assets (note 6). The following weighted average assumptions were used for the Black-Scholes valuation of stock options granted during the three months ended March 31, 2016. March 31, 2016 March 31, 2015 Risk-free interest rate 0.43% 0.55% Expected dividend yield - - Expected stock price volatility 76% 79% Expected forfeiture rate 1.0% 1.0% Expected option lives (years) 3.00 4.46

Share-based payment reserve Share-based payment reserve records items recognized as share-based compensation expense and the fair value of warrants issued based on the residual method. At the time that the stock options or warrants are exercised, the corresponding amount is reallocated to share capital, or if they are cancelled the corresponding amount is reallocated to deficit. During the three months ended March 31, 2016, the Company reallocated $6,314 (March 31, 2015 – $nil) to capital stock for the exercise of 63,250 (March 31, 2015 – nil) options.


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10. CAPITAL STOCK AND RESERVES (continued)

Warrants

Warrant transactions and the number of warrants outstanding are as follows: Number of Weighted Average Warrants Exercise Price As at December 31, 2014 50,191,512 $ 0.20

Expired (8,198,380) $ 0.19 Exercised (455,526) $ 0.20

As at December 31, 2015 41,537,606 $ 0.26

Exercised (10,000) $ 0.25

As at March 31, 2016 41,527,606 $ 0.26

Warrants Outstanding

Exercise Price Expiry Date Number of Warrants Issuable on Exercise

Weighted Average Remaining Life

(Years)

Weighted Average Exercise Price

$ 0.20 February 28, 2017 8,571,429 0.92 $ 0.20 $ 0.34 September 10, 2017 1,261,427 1.45 $ 0.34 $ 0.34 October 15, 2017 6,130,673 1.54 $ 0.34 $ 0.36 November 27, 2017 2,004,995 1.66 $ 0.36 $ 0.25 December 12, 2017 22,216,583 1.70 $ 0.25 $ 0.25 December 30, 2017 1,342,499 1.75 $ 0.25

41,527,606 1.51 $ 0.26

11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS The Company’s financial instruments consist of cash and cash equivalents, held-for-trading securities, deposit, accounts payable and loan payable. The carrying value of accounts payable and loan payable approximates the fair value due to the short periods until settlement. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. The Company’s cash and cash equivalents and held-for-trading securities are measured using level 1 inputs. 12. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS Supplemental disclosure of significant non-cash transactions is provided in the table: For the three months ended March 31, 2016 2015 Non-cash financing and investing activities Capitalized to exploration and evaluation assets

Depreciation $ 58,870 $ 5,068 Interest expense $ 41,081 $ - Share-based compensation $ 50,598 $ 1,350

Capitalized to property, plant and equipment Rehabilitation provision $ 19,434 $ -

Included in accounts payable and accrued liabilities Exploration and evaluation assets $ 19,168 $ 41,646 Property, plant and equipment $ 21,315 $ -


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13. SEGMENTED INFORMATION The Company primarily operates in one reporting operating segment, being the acquisition, exploration and evaluation of resource properties located in two geographical segments, Canada and Guyana. Geographical segmented information is presented as follows: March 31, 2016 Canada Guyana Total Net loss for the period $ 170,735 $ 63,727 $ 234,462 Asset Information Deposits $ - $ 252,705 $ 252,705 Rental deposit $ 46,576 $ - $ 46,576 Exploration and evaluation assets $ - $ 10,525,833 $ 10,525,833 Property, plant and equipment $ - $ 4,498,755 $ 4,498,755

March 31, 2015 Canada Guyana Total Net loss for the period $ 330,833 $ 33,952 $ 364,785 Asset Information Deposits $ - $ 206,825 $ 206,825 Exploration and evaluation assets $ - $ 7,760,423 $ 7,760,423 Property, plant and equipment $ - $ 932,669 $ 932,669

14. SUBSEQUENT EVENTS The following events took place subsequent to March 31, 2016:

250,000 incentive stock options priced between $0.16 and $0.24 were exercised for aggregate proceeds of $46,000.

5,287,785 share purchase warrants priced between $0.20 and $0.25 were exercised for aggregate proceeds of $1,275,607.

38,750 incentive stock options priced between $0.20 and $0.28 were forfeited.

CONDENSED CONSOLIDATED INTERIM FINANCIAL …€¦ · authorized for issue by the board of directors of the Company on May 26, 2016. These condensed consolidated interim financial

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